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London refurbs give developers highest returns

Posted by Marianne
September 24, 2014 in Property Development

An  office fit out  office fit out in London is the most profitable for developers, according to recent industry research.

The study looked at returns on developments across the biggest cities in the world, ranking each location according to the rental returns that can be expected to be realised on refurbished properties that are at least two to three decades old.

It found that London was comfortably out in front in the major renovation stakes, with developers seeing a yield of nearly 10% against their expenditure. Perhaps most surprising though was the second placed city, with Warsaw (7.5%) finishing ahead of the Milan (6%) in third.

Frankfurt with 5.8% and Amsterdam with 5.5% rounded off the top five.

The reason for each city performing so well was largely a result of the volume of old office stock each enjoys. In old European cities, there is still a great deal of potential for updated office fit outs, whether through extension or major redesigns.

In the capital, the trend for older facades with modern interiors is fuelling returns as well.

London also performed well in the minor refurbishment stakes too, finished second with 8.5%. First place was taken by Madrid, with developers seeing returns of 9.6% on spend. The top three locations for returns on minor works was completed by Shanghai, with expected yields of 7.9%.

Singapore (7.53%) and Warsaw with 7.47% completed this top five.

The market seeing the least returns for developers was Dubai. With building work ongoing for many years in the UAE state, the huge stocks of brand new and nearly new office developments were the decisive factor here.

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